CBN’s strategic float of Naira reverses currency misfortunes

Current reports across markets indicate that Central Bank of Nigeria’s long-haul strategy may have a sustained positive results in the area the apex bank had been most vulnerable – foreign exchange market and the external sector.

Despite the huge foreign exchange resource deployment to counter speculators in the Nigerian currency market, the external reserves reached a 17-month high yesterday at USD30.1 billion, indicating a new threshold in the external sector strategy of the Central Bank of Nigeria, CBN.

The apex bank has been in a battle to save the local currency from speculative attacks since 2015, at the backdrop of worsened foreign exchange inflow orchestrated by the sharp drop in the oil prices, Nigeria’s major foreign exchange earner.

Consequently, the external reserves began a steady depletion trend from USD31.8 billion mid-2015, hitting the lowest point of USD23.9 billion on the 19th October 2016.

However, a combination of deft strategies by the CBN and the fortune of oil price and output rebound in the fourth quarter of 2016 ensured a reversal of the decline with a sustained accretion and build up since then leading to yesterday’s figures which was the level as at November 26, 2015.

The key strategy of Godwin Emefiele’s CBN in the face of the twin problem of speculative attacks and decline in oil earnings, was foreign reserve preservation within the acceptable import cover benchmark of about USD23 billion, which the apex bank achieved substantially.

Consequently, the forex policy strategy was elevated two weeks ago, to counter-speculation and grip on parallel market rate.

The policy appeared to be recording success, forcing parallel market rates to reverse from N520/ USD1 to about N455/ USD1 within two weeks of launch.

Meanwhile, Nigeria’s naira exchange rate was steady on both the official and black markets on Friday after President Muhammadu Buhari’s return home from extended medical leave in Britain.

The naira was quoted at 310.50 on the official market while black market rate stood at 458. The central bank has been intervening on the official market over the past two weeks to boost liquidity and support the currency.